If net present value of a project is greater than zero, the firm will earn a return greater than its cost of capital. The acceptance of such a project would enhance the wealth of the firm's owners.

Question

Quizplus · Accepted Answer

Net present value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows of a project. If NPV is greater than zero, it means that the project is generating more cash than it costs, and the firm is earning a return greater than its cost of capital. Therefore, accepting such a project would enhance the wealth of the firm's owners.

If Net Present Value of a Project Is Greater Than